Marathon Oil Corp. capital spending will be at least $600 million less in 2016 compared with this year, and in the United States, unconventional plays will get the dollars as they have proven to be more economic than conventional activities, CEO Lee Tillman said in New York City Wednesday.
"Every dollar is under scrutiny. There is no spend too small to challenge," Tillman said at the Barclays CEO Energy-Power Conference, during which he said the company is taking a "strong response" to "lower for longer pricing." There is no incentive to accelerate activity with prices where they are today, he said.
Like its peers, Marathon is working to formulate a strategy for living in a "lower for longer" world where oil prices are concerned.
The $600 million spending reduction is just the beginning, Tillman said, as the company continues to look for ways to trim costs and boost efficiencies in next year's plans. What is known is that the Eagle Ford and Bakken Shales along with the South Central Oklahoma Oil Province (Scoop) and Stack plays will be the area of focus.
That $600 million is coming off a 2015 capital budget that is expected to wind up at or below $3.3 billion, Tillman said.
New venture funding for conventional projects has been suspended, and the company is not planning to drill any conventional exploration wells next year, Tillman said. It "has become increasingly more difficult" for conventional plays to compete on the basis of costs, quality and risks, he said.
At $50/bbl West Texas Intermediate (WTI) oil prices, $3.00/Mcf natural gas and $16.00/bbl natural gas liquids, Marathon is not opportunity constrained, Tillman said. In the United States, the opportunities next year and beyond will be in the Eagle Ford, Bakken and in Oklahoma, where the company's largest proved, probable reserve addition comes from the Scoop and Stack.
"Our resource plays single well economics continue to be durable across a range of prices. Our U.S. resource plays offer competitive returns in a lower for longer price environment," he said.
About 77% of the company's U.S. resource play inventory is breakeven at $50/bbl WTI. At $70/bbl WTI that figure rises to 98% breakeven, he said.